Bear and Bull Markets on the ASX: What Australian Investors Should Know

Bull markets on the ASX are characterised by economic optimism, rising corporate earnings, and increasing participation from retail investors. They can last years — the ASX experienced a sustained bull run from 2012 to early 2020 before the COVID crash.

Bear markets are shorter but feel far more intense. The ASX 200 fell roughly 37% in just five weeks during March 2020. Historically, ASX bear markets last about 9-14 months. Every bear market in Australian history has eventually been followed by recovery and new highs.

The most costly mistake is panic-selling during an ASX bear market — converting paper losses into real ones, triggering a CGT event, and then missing the recovery. Australians who sold in March 2020 and waited to reinvest missed one of the strongest recoveries in ASX history, with the index gaining over 50% in the following 12 months.

The practical wisdom: bull markets reward patience, bear markets reward discipline. Dollar-cost averaging is particularly powerful during bear markets, as your regular investment buys more ASX ETF units at lower prices — positioning you for outsized returns during the recovery.

For FIRE-focused Australians, sequence of returns risk — experiencing a bear market early in retirement — is a critical planning consideration. Having a cash or bond buffer equivalent to 2-3 years of expenses can protect your portfolio from forced selling during downturns.